What is labor supply elasticity?
Labor supply elasticity refers to what happens to the supply of workers when the overall compensation for a job changes. If a job is very elastic, the number of people willing to work will increase if the compensation increases. If the compensation decreases, the number of people willing to work will decrease. On the other hand, an inelastic labor supply won't be affected by pay changes.
A very good example of an elastic labor supply is in the field of education. As pay and benefit packages either have been cut or have remained flat, many school districts are having a difficult time finding teachers to work in their schools. For various reasons, including flat or lower salaries and lower benefit packages, people are opting to do other jobs instead of working in the classroom. These people are showing their dissatisfaction by not taking open positions, not going into the profession, or leaving the profession. If compensation and benefit packages improved, the supply of teachers should increase.
The elasticity of the supply of labor refers to the degree to which the quantity supplied of labor will go up or down as wages increase or decrease. If there is a high degree of elasticity, the quantity supplied of labor will change a great deal as wages change. If the supply is inelastic, the quantity supplied will not change much as wages change.
The supply of labor is generally said to be more elastic in lower-skilled jobs that require less training. For more skilled jobs, the supply of labor cannot change very quickly. For example, if the wages of doctors went up, there would be no great change in the number of doctors working because it takes a long time to get the training needed to be a doctor.
what is income effect and substitution effect?
Elasticity of labour measures the responsivness of quantity supplied of labour for a change in the wage leve.There are factors which affect the elasticity of supply of labour as :- training and qualifications , the length of training required, employment level in the contry, the mobility of labour.
always remember in the short run labour is said to be inelastic as its difficult to increase the supply in the long run.
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